Grace Shareholders Forget Past, For Now

JACK NEASE - Commentary

May 11, 1995|Jack Nease

On the 10th day of his $900,000-a-year job, the new boss of W.R. Grace & Co. was privileged to preside over a love-in.

Instead of hostile questions, Grace shareholders who attended an annual meeting in Boca Raton lobbed softballs at Al Costello. Instead of recriminations about the past, they asked Grace's new chief mostly hope-ful questions about the future.

What a difference a rising stock price makes.

A few months ago, Grace shareholders were up in arms about perks paid the late J. Peter Grace Jr. and his family. They were worried about apparently unfair charges of sexual harassment spread about their ousted president, J.D. Bolduc.

On Wednesday most of these same investors, holding shares that have increased 45 percent in value since March, were willing to let bygones be bygones - and look to higher stock prices in the future.

Costello appeared to enjoy the day - the day directors got around to naming him chairman. He's been president and chief operating officer of the beleaguered company for less than two weeks.

Grace's future still uncertain

From here on out, things are going to get tougher for the 59-year-old veteran of corporate takeover wars. The long knives that helped usher Bolduc out may be sheathed, but could be deployed again.

One of Grace's directors, Constantine Hampers, lost out in a bid to succeed Bolduc and has now launched a unsolicited bid to buy out a large and profitable subsidiary of the company, National Medical Care. As a result, the unit is - in Wall Street parlance - "in play" and a chain of events has begun that could make the whole company a takeover target.

The director's vote to give Costello the job, with its $900,000-a-year salary and minimum $900,000-a-year bonus, was 13 to 5, with two abstensions.

Apparently aware of the precariousness of his position and uncertain as to whether he wants to retire to Florida, Costello is keeping his home in New Jersey and looking for a second house in South Florida.

A "large pretty home" is what he is looking for, Costello said during a break between meetings and conferences Wednesday. He's looked with his wife, Barbara, at some in Highland Beach "right on the beach" and plans to look in Gulf Stream soon.

While the executive suites of Grace may remain more Machiavellian than average, the company seems to have weathered the financial storm touched off by Bolduc's ouster.

After Bolduc was pushed, documents were leaked disclosing an intra-company battle over making public about $1.3 million in benefits provided the late J. Peter Grace after he retired as president but continued as chairman, and to his son, Peter Grace III.

Letting go of the past

Then documents were leaked accusing Bolduc of sexual harassment - vague accusations not followed up with any formal charges or specifics.

Wednesday most Grace shareholders seemed willing to forget about those hassles. About 81 percent of proxies cast voted in favor of the company's slate of directors. About 19 percent withheld approval.

Such percentages may indicate that Wednesday's meeting was the last love-in Costello may preside over.

Of course, if National Medical is sold for more than $3 billion in cash, as is being proposed, and the cash stays too long on Grace's balance sheet, the whole company could become a ripe takeover target.

Then the game will be over anyway.

Sun-Sentinel columnist Jack Nease comments on business and economic issues affecting South Florida on Sunday, Tuesday, Wednesday and Thursday.